Stock and Shares Basics

       After a long, long while I was able to eat pizza again! The last time I tasted 1 was I think around 2 years ago or more. I just had a few slices of it until I felt my stomach was full. Yummy! It was my treat to my buddy because I have a feeling that my stocks will go up this week and I'll earn a big profit. Ha ha ha! I was just speculating.

       What is stock anyway? If you google it from the internet, the stock or capital stock of  a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to harm or damage the creditors. The stock of a business is divided into shares, the total of which must be stated at the time of business formation. Shares represent a fraction of ownership in a business.

       The mentioning about pizza at the start of this post actually will help us understand about stock and shares. Imagine that we have a big pizza in a table which was sliced into 8 equal parts. Let's say the pizza would be a particular stock and then slices that were made would be the shares. Owning 1 of the slices means you are a shareholder of that particular stock, pizza. Ownership of  shares is documented by issuance of a stock certificate which is a legal document that specifies the amount of shares owned by the shareholder and the other specifics of the shares such as par value, if any, or the class of the shares.

                                                            sample of a stock certificate
       In today's computer age, you won't actually get to see this document because our brokerage keeps these records electronically. If you have an online broker like mine which is FIRSTMETROSEC, you will receive copies of your purchase confirmation or sale confirmation online after selling or buying shares at their website.
       There are two types of stock; common stock and the preferred stock. Common stock is, well, common! When people talk about stocks they are usually referring to this stock. It typically carries voting rights that can be exercised incorporate decisions. On the other hand, a preferred stock does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders. But common stock also has dividends. I only buy common stocks and for the past 2 months I was able to receive dividends from some of those stocks, "i can add it to my funds or I can use it to treat my baby at Jollibee".
       How would you like to be a shareholder of your favorite foodchain like Jollibee or banks or those malls? If you could not afford the whole "pizza", then just take the "slices" that you can afford for now! Stocks anyone?!
- Romer
NEXT: MORE ABOUT STOCKS